New shareholder lawsuit targets Groupon execs
Suit accuses the daily deals site's executives of failing its management responsibilities with recent accounting flubs.
Groupon has been hit with another lawsuit from a shareholder upset with the daily-deals company's recent bookkeeping flubs.
The latest complaint, filed Thursday in U.S. District Court for the Northern District of Illinois Eastern Division, is a derivative lawsuit that accuses the daily-deals site's directors of management failure. Theresa Monturano's 31-page filing (see below) claims the company's management failed its responsibilities when it announced late last month that an accounting error would force it to revise its first set of financial results as a public company. (A derivatives lawsuit is filed when a shareholder seeks to prevent or remedy a wrong to the company.)
"By reason of their positions as officers, directors, and/or fiduciaries of Groupon and because of their ability to control the business and corporate affairs of Groupon, defendants owed Groupon and its shareholders fiduciary obligations of good faith, loyalty, and candor," the complaint states. "Defendants intentionally, recklessly, or negligently breached or disregarded their fiduciary duties to protect the rights and interests of Groupon."
The Chicago-based company revealed in a regulatory filing that it had discovered "material weakness" in internal controls over its financial statement and that its fourth-quarter results were worse than previously stated because of higher refunds to merchants. The revisions increased its net loss for the fourth quarter by $22.6 million and reduced revenue for the quarter by $14.3 million to $492.2 million.
In addition to unspecified damages, Monturano's lawsuit seeks the right to nominate at least three candidates for the company's board of directors.
A Groupon spokesperson declined to discuss the lawsuit, saying the company doesn't comment on pending litigation.
The complaint comes on the heels of another shareholder lawsuit that cited the financial revision as evidence the company misled investors about its financial health. Shareholder Fan Zhang said he paid nearly $62,000 for 3,000 Groupon shares between February 9 to March 6, only to sell them in March for a loss of more than $9,000.
In addition to the shareholder lawsuits, the company may face increased regulatory scrutiny. After Groupon announced its financial revision, there were reports that the company's accounting procedures had again attracted the attention of the U.S. Securities and Exchange Commission, though the commission has reportedly not yet elected to launch a formal investigation of the company. An SEC review of Groupon's accounting procedures forced the daily deals provider to revise its IPO filing papers last year after the company reported that it generated $713.4 million in revenue in 2010, while the SEC said that the figure should be $312.9 million.
[Via PaidContent]